Taper Talk Sends Markets Tumbling for Third Straight Day
Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
As of 1:10 p.m. EST the Dow Jones Industrial Average is lower by 109 points, or 0.68%, the S&P 500 has lost 0.% and the Nasdaq is down 0.03%. As they sit now, the major U.S. indexes are having their worst three-day streak since early October. Many observes are blaming investors' fears that the Federal Reserve may begin tapering its stimulus activities at its Dec. 17-18 meeting. With a stronger jobs market, a healthier economy, and positive economic numbers continuing to roll in almost daily, those who believe a taper is coming do have a point. Furthermore, some have argued that incoming Fed Chairwoman Janet Yellen was brought in because she is considered dovish, thus she can't be the one to begin the taper a month or two after she takes over for Ben Bernanke -- meaning he needs to begin it now at what will be his last meeting. This just adds to the taper talk.
With the Dow heading south in such a big way, its easy to see why only three of its 30 components are trading in the black today. Across the universe of stocks, it is a sea of red, so let's take a look at a few of the bigger losers.
Shares of Sirius XM are lower by 1.15% today, which isn't a massive move for the stock; but considering that shares were trading above $4 back in late October and are now down to $3.45, the move can be concerning to shareholders. Furthermore, Sirius now the most shorted stock in the U.S. Currently, 303 million shares are sold short, which represents 9.74% of the company's 3.1 billion float. While this doesn't materially change the facts about the company in any way, the short-sellers could be one reason why shares have fallen recently and certainly make others wonder what they know that makes them short the stock. Investors should know this information, but leave it at that and hold tight if they believe in the long-term prospects of the business.
Shares of lululemon athletica have fallen 11% today. The reason for this decline is the apparel maker's third-quarter report, which offered not-great. not-poor numbers for most recent period, but raised worries with its forward guidance. For the quarter, same-store sales rose 5% while gross margin also gained more than 1% when compared to the previous six months of the year. The guidance called for flat same-store sales and a 4%-7% increase to earnings per share compared to the same quarter of 2012. For a company with a price-to-earnings ratio of 32, and one that has a lot of growth built into the share price, this is not what investors wanted to hear today. But this is one quarter and not yet a trend, so shareholders should hold on. Additionally, with the new CEO and outgoing chairman, big changes could be on the horizon for the company.
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Fool contributor Matt Thalman owns shares of Sirius XM Radio and Lululemon Athletica. Check back Monday through Friday as Matt explains what causing the big market movers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513. The Motley Fool recommends Lululemon Athletica. The Motley Fool owns shares of Sirius XM Radio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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